Monday 12 July 2021

Whether the appeal is maintainable U/S 37 of Arbitration Act against the order passed by the arbitrator in the application for party addition?

Hindustan Prefab Ltd. (hereinafter ‘HPL’) has filed the present

appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an order dated

09.04.2021 (hereinafter ‘the impugned order’) passed by the learned Arbitral Tribunal. By the impugned order, the Arbitral Tribunal rejected the appellant’s application to implead National Law University, Orissa (hereinafter ‘NLUO’) in the arbitral proceedings pending between HPL and the respondent (hereafter ‘NCC’).

5. First of all, this Court has serious reservations as to whether the present appeal is maintainable. Impleadment of a party is not an “interim measure”, which as the expression suggests would be

operative till conclusion of the arbitral proceedings. The application for seeking impleadment of NLUO before the Arbitral Tribunal cannot be considered as an application for an interim measure of protection. Thus, such a relief would not fall within the scope of an application under Section 17 of the A&C Act. Consequently, it is doubtful whether any order of the Arbitral Tribunal for refusing to join any other party in the arbitral proceedings can be made a subject matter of an appeal under Section 37 of the A&C Act.

IN THE HIGH COURT OF DELHI AT NEW DELHI

 Date of Judgment : 3rd June, 2021

ARB. A. (COMM.) 26/2021 and IA Nos. 7261/2021

& 7262/2021

HINDUSTANT PREFAB LTD.  Vs M/S. NCC LIMITED 

CORAM:

HON'BLE MR. JUSTICE VIBHU BAKHRU

Dated:  03.06.2021

1. Hindustan Prefab Ltd. (hereinafter ‘HPL’) has filed the present

appeal under Section 37(2)(b) of the Arbitration and Conciliation Act,

1996 (hereinafter the ‘A&C Act’) impugning an order dated

09.04.2021 (hereinafter ‘the impugned order’) passed by the learned

Arbitral Tribunal. By the impugned order, the Arbitral Tribunal

rejected the appellant’s application to implead National Law

University, Orissa (hereinafter ‘NLUO’) in the arbitral proceedings

pending between HPL and the respondent (hereafter ‘NCC’).

2. HPL contends that since disputes between the parties arise in

relation to a contract for construction of the proposed building of

NLUO, NLUO would be a proper and necessary party to the arbitral

proceedings.

3. Mr. Gupta, learned counsel appearing for the appellant,

submitted that since HPL was only entitled to retain a small

commission on the amounts payable by NLUO and the entire fund for

the construction and development of the project in question was

required to be paid by NLUO, it would necessarily have to be

impleaded in the arbitral proceedings. He submitted that in absence of

impleading NLUO, HPL may be held liable for the amounts due to

NCC. However, HPL had little stake in the construction contract as it

was only acting as an executing agency on behalf of NLUO.

4. I have heard the learned counsel for the appellant.

5. First of all, this Court has serious reservations as to whether the

present appeal is maintainable. Impleadment of a party is not an

“interim measure”, which as the expression suggests would be

operative till conclusion of the arbitral proceedings. The application for seeking impleadment of NLUO before the Arbitral Tribunal cannot be considered as an application for an interim measure of protection. Thus, such a relief would not fall within the scope of an application under Section 17 of the A&C Act. Consequently, it is doubtful whether any order of the Arbitral Tribunal for refusing to join any other party in the arbitral proceedings can be made a subject matter of an appeal under Section 37 of the A&C Act.

6. Having stated the above, this Court also considers it apposite to

examine the petitioner’s claim, whether it is entitled to join NLUO as

a party to the arbitral proceedings.

7. HPL and NLUO had entered into an agreement dated

07.09.2010 (hereinafter ‘the Principal Agreement’). The first recital

of the Principal Agreement indicates that NLUO had accepted the

offer submitted by HPL and appointed HPL as a “Principal

Contractor for executing the construction work of proposed National

Law University, Orissa, Naraj, Cuttack.” In terms of Clause 18 of the

Principal Agreement, HPL was required to submit a bar chart

providing details for the items of construction as stated in the said

Clause. In terms of Clause 19 of the said Agreement, HPL had agreed

to “complete all the work as per the bar chart submitted by them”.

The said Clause also provided that in the event the Principal

Contractor (HPL) failed to execute the contract on schedule, NLUO

would have the power to employ any other agency. The Principal

Agreement also contained provisions to enable HPL to appoint a subcontractor.

Clause 21 of the Principal Agreement is relevant and is set

out below:

“21. M/s. HPL can appoint if required sub contractor’

whose engagement as sub contractor which will be

confirmed by NLUO for executing works like

Civil, Structural, P.H., Electrical etc.”

ARB. A. (COMM) 26/2021 Page 4 of 7

8. The Principal Agreement was amended by the concerned

parties (HPL and NLUO) in terms of their agreement dated

23.02.2012 (hereinafter ‘the Amendment Agreement’). Amongst other

amendments, the reference to HPL as the Principal Contractor was

amended to read as Executing Agency. The reference to a ‘subcontractor’

was amended to read as ‘Contractor’. Thus, HPL was now

required to act as an executing agency and the works would be

executed by a contractor selected by HPL. Clause 21 of the

Agreement was amended to read as under:

“21. M/s. HPL can appoint ‘contractor’ whose

engagement as contractor which will be confirmed

by NLUO for executing works like Civil,

Structural, P.H., Electrical etc. Engagement of

contractor by HPL will not in any way absolve

them from their duties, responsibilities and

liabilities under this Agreement”.

9. As is apparent from the plain language of the last line of Clause

21 of the Principal Agreement as amended by the Amendment

Agreement, HPL continued to be responsible for execution of the

works and contracting the works to a Contractor (as subsequently did

in favour of M/s NCC Ltd.). HPL did not absolve itself of its

responsibilities and obligations under the Principal Agreement.

10. HPL floated a tender for construction of the proposed National

Law University and, issued a Notice Inviting Tenders (NIT). Pursuant to the NIT, on 09.10.2010, M/s NCC Ltd. (then known as ‘Nagarjuna Construction Co. Ltd.’) submitted its bid for execution of the said works. The rates of M/s NCC Ltd. (hereinafter ‘NCC’) were found to

be the lowest and on 10.12.2010, HPL entered into an agreement

(hereafter ‘the Agreement’) with NCC for construction of the

proposed National Law University. Apparently, disputes arose

between the parties (HPL and NCC) in connection with the Agreement

and NCC invoked the Arbitration Clause as contained in the

Agreement dated 10.12.2010.

11. It is relevant to note that the NIT tender issued by HPL

indicated that it had been appointed as the executing agency for

construction of the National Law University at Cuttack, Orissa.

However, it did not indicate that the tenders were being invited for and on behalf of NLUO.

12. The Agreement entered into between HPL and NCC refers to

NCC as a sub-contractor. Although the terminology may not be

relevant, however, the said Agreement indicates that NCC had

submitted its bid, which was accepted by HPL. The Agreement also

does not state that HPL was entering the contract as an agent of

NLUO. A plain reading of the Agreement indicates that it is a contract

between a principal and a principal.

13. The General Conditions of the Contract (GCC), which form a

part of the Agreement entered into between HPL and NCC, also

includes an Arbitration Clause.


14. At the outset, Mr Gupta conceded that the said Arbitration

Clause as included in the Agreement, is applicable only to the disputes

between HPL and NCC and, NLUO is not a party to the said

Agreement to refer the disputes arising from the Agreement to

Arbitration.

15. It is also relevant to note that the Principal Agreement between

HPL and NLUO also includes an agreement to refer the disputes to

arbitration. Clause 46, 47 and 48 of the Principal Agreement are set

out below:

“46. All differences or dispute arising between M/s.

HPL & NLUO on any matter connected with the

agreement or in regard to the interpretation of the

content their of shall be referred to the Vice

Chancellor of the National Law University,

Orissa whose decision will be accepted by M/s.

HPL.

47. Any dispute arising under this agreement between

the parties hereto shall be referred for

adjudication to a sole arbitrator in the manner and

in terms of the provisions as laid down in the

General Conditions of Contract. The Chancellor

of National Law University, Orissa will appoint

an Arbitrator. The award of the arbitrator shall be

final and binding on both the parties.

48. All disputes arising out of or in any way

connected with this agreement shall be deemed to

have arisen at Cuttack, Orissa and courts in

Cuttack alone shall have jurisdiction to determine

the same.”

16. As is apparent from the above, reference of any disputes

between HPL and NLUO to arbitration would be in terms of the

aforesaid clauses and not in terms of the Arbitration Clause included

in the Agreement between HPL and NCC.

17. Since it is conceded that NLUO is neither a signatory nor a

party to the agreement between HPL and NCC to refer the disputes to

arbitration, NLUO cannot be impleaded as a party to the pending

arbitral proceedings between HPL and NCC.

18. The appeal is accordingly, dismissed. All pending applications

are also disposed of.

VIBHU BAKHRU, J

JUNE 03, 2021

RK

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